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According to expert estimates, only 3 out of 10 businesses for sale that are sold eventually find new owners. Selling a business is not the easy way, and the owner can expect many pitfalls and difficulties. Let’s figure out how to cope with these difficulties as painlessly as possible, avoid common mistakes and successfully sell your business. If you have long been wondering “How do I sell my business?” – this article is just for you.
In this text, we have touched upon some important points of this procedure and prepared for you some recommendations from our auditors and financiers.
How to sell a business
Step 1: Professional business valuation
The first thing to do is to determine the value of your business. As a result of this procedure, you will roughly understand the value of your assets, as well as identify areas that need to be optimized or improved to increase this value. It is advisable to involve specialists in this process who will make an objective opinion about the price and share their recommendations.
How to sell my business: the valuation process
There are three methods of business valuation to determine the value of your business.
Method 1 – costly. The essence of this method is as follows: you calculate how much it may cost to create a similar business from scratch. This way you can estimate the tangible assets of your business, but you can only estimate the prospects and income approximately.
Method 2 – profitable. The future buyer is interested in the question of when he will be able to “recoup” his investment. Using this method, you can estimate the number of future profits based on past cash flows and present ones. However, to give an accurate forecast using this method will not work.
Method 3 – comparative. Here, the value of the business is estimated using coefficients based on sales data of similar businesses. With this method, you can objectively assess how fair your price is. The accuracy of this method, like the previous ones, is not one hundred percent, as it depends on the sample on which the analysis is based.
When determining the value of a business, a combination of the above methods is usually used, since none of them separately evaluates the business comprehensively. Also, do not forget that demand has a great influence on the price.
Step 2: Put finances in order
If you have long been wondering “How do I sell my business successfully?”, then start preparing for the sale with finances. A potential buyer is undoubtedly interested in what financial prospects await him after the transaction. Therefore, it is worth taking care of the assessment of the company’s financial statements in advance. It allows investors to get acquainted with the financial condition of the business, to assess how promising and profitable it can be. All documentation demonstrating the indicators of economic activity must be drawn up by legal requirements, and be transparent, reliable, and understandable.
Step 3: Search for a business broker
As a rule, business brokers are involved in expert analysis of financial statements, and general preparation for sell of a business WebsiteClosers. They assess the reliability and check for compliance with legal norms and standards. Based on the results of the analysis, a report is made, which either confirms or refutes the reliability of the reporting, as well as indicates inaccuracies and violations, if any. Such a document will allow you to bring the reporting in order.
If you looking for someone who can sell your business, you can find it on special websites, as well as through friends.
Step 4: Finding a buyer
Selling a business is no different from selling any other product. Buyers can be found on specialized online platforms, through word of mouth, or by contacting specialists who deal with such transactions. Quite often, companies that are engaged in business valuation, help with the search for buyers. Additionally, online platforms can help you target specific locations as well. For example, if you’re searching for people that want to buy a business in Toronto, some sites may be more effective than others.
If you conclude: “I want to sell my company”, it is very important to convince the buyer of the business that the ad provides up-to-date information that reflects the state of affairs in the business being sold. You can offer the potential buyer to send by e-mail a detailed presentation of your business, prepared at the previous stage. By the way, few people prepare such presentations, so if you do it, you will stand out from other business sellers.
Step 5: Preparation and sale
The process of transferring rights can take quite a long time. After the preliminary contract is concluded, the buyer can exercise the right to inspect the business and order its evaluation by an independent expert. To be fully armed and reasonably answer possible questions, as well as to conclude a purchase and sale agreement by all the rules and to protect yourself from possible claims from the buyer, it is recommended to involve a lawyer in the transaction. Additionally, seeking expert guidance from a reputable mergers and acquisition consulting firm can provide invaluable assistance throughout the process. Upon final agreement, the parties sign the final contract and notarize it.
How to sale my business: the main thoughts
- Preparation. To sell a business, you need to spend time on preparation, evaluation, and packaging. Otherwise, the chance of sale will go to zero.
- Expenses. Free sale is possible only to your friends or, for example, competitors. If you want to find a buyer in another way, get ready to pay for advertising.
- Negotiations. Prepare for them in advance, and think over scripts for calls and meetings. Write down new objections, because most of them will be repeated. It is important to analyze them and think about how to work them out next time.
- Time. This is not an instant process and takes time at all stages. Ultimately, the speed will depend on the “deliciousness” of your offer (value for money), the speed of spending the advertising budget, and the quality of preparation for meetings.
So, in this article, we have considered all the main stages of selling a business. If you have come to the thought “I want to sell my business”, then do not forget to take into account the nuances that may arise at each stage, as well as follow the tips and recommendations given here, and then you will be able to quickly and profitably sell your business.
